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Tax Collecting Efforts and Local Allocation Tax Grants in Japan: The Effect of Administrative Reform Incentive Assessment on Local Tax Collection Rates

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  • Ishida, Mitsunari

Abstract

As part of the Trinity Reform, the Japanese Ministry of Internal Affairs and Communication (MIC) established the Administrative Reform Incentive Assessment (ARIA) program under the local allocation tax (LAT) system during the fiscal year of 2005. This program was aimed at motivating local governments with LAT grants to raise their tax collection rates (TCRs), since a number of economists had asserted that LAT grants eroded the fiscal discipline of local governments. Our paper uses empirical methods to estimate the average treatment effect (ATE) of the program and finds that it does not provide such an incentive and that the TCRs of local governments are unchanged by the Trinity Reform, irrespective of whether these governments receive LAT grants. We also conclude that the TCRs do not support the argument that LAT grants diminish the tax collection incentives of local governments.

Suggested Citation

  • Ishida, Mitsunari, 2011. "Tax Collecting Efforts and Local Allocation Tax Grants in Japan: The Effect of Administrative Reform Incentive Assessment on Local Tax Collection Rates," ビジネス創造センターディスカッション・ペーパー (Discussion papers of the Center for Business Creation) 10252/4543, Otaru University of Commerce.
    • Handle: RePEc:ota:busdis:10252/4543
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    Cited by:

    1. Brosio, Giorgio, 2014. "Decentralization and Public Service Delivery in Asia," ADB Economics Working Paper Series 389, Asian Development Bank.

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